Update: Breslow (State of Nevada) Home Retention Program

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To read the original summary and my thoughts on why this is a bad program go to: Bruce Breslow (State of Nevada) To Purchase Underwater Mortgages

I must have missed this the first time I read through the articles.

According to the Las Vegas Review journal, article here, $100 million of the funds used in the program will be from the treasury department.

Breslow was quoted as saying this will have no cost to the state. While that is technically true it doesn’t mean this won’t have a cost to tax payers.

The treasury doesn’t exactly have a surplus of money to hand out for government programs. Our government doesn’t make any money so they can only tax or print currency. The fiat currency used to pay for Nevada’s Home Retention Program will be from freshly printed dollar bills (electronic transfer of funds these days). My best guess is it’s from QE3 but I’m not an economist.

What happens when the treasury prints currency it can’t back up?

More money printed without a backing of something with intrinsic value lowers the value of the dollar and will end up creating hyper inflation.

So there you go. While this program doesn’t cost the State of Nevada anything it will end up costing tax payers via lower dollar value, higher product prices, and future inflation.

Any thoughts?

For more information on buying or selling a home in Reno and Sparks, Nevada contact Broker Ricky Beach at (775) 750-1437 or Ricky@Resnv.com

 

Bruce Breslow (State of Nevada) To Purchase Underwater Mortgages

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bruce breslow home retention program nevada business and industryCatherine Cortez-Masto may have some competition for her future gubernatorial bid as Bruce Breslow is trying to woo the hearts of Nevada residents.

Bruce, Director of the Nevada Department of Business and Industry, is putting together a little program to dent the shadow inventory issue.

Media articles can be read here… RGJ.com, LVRJ.com, LasVegasSun.com. The articles are pretty good overviews but the actually press release gives the most information. View the press release by clicking the picture below.

nevada home retention information

How It Works

The State of Nevada creates a non-profit that will use $150 million in funds from the National Mortgage Settlement to give certain home owners the opportunity to refinance out of their current loan to a current market value loan. The underwater loans will be obtained in pools at 70 cents on the $1.00. Should the owner not want to participate or if the property is vacant the program will put the home on the resale market available only to owner occupants.

Why It’s A Bad Idea

  • The State Won’t Have To Obey It’s Own Laws: The reason we have so much shadow inventory is because Cortez-Masto created AB 284. The bill required more documentation and created a hurdle for foreclosing banks. Hence, lot’s of homes being lived in without the owners making payments. The press release says, “The program may need legislation to create a fast track foreclosure path for homes in this program that are empty, abandoned, or where a homeowner is refusing to make payments or enter this fair new program. Meaning, the State of Nevada sponsored program will not have to obey current foreclosure laws like every other lien holder, bank, and mortgage servicer. I’m never a fan of our government making a law they don’t have to obey. (Press Release 1/30/2013)
  • 700-800 Homes: Breslow predicts the program will help 700-800 homes until the newly created loans are paid down and replenish the program’s trust account. Really, the best use of this $150 million is to randomly pick 700-800 homes (some of which may be vacant). They better be doing their homework about the homes they’re purchasing. (RGJ.com 2/9/2013)
  • Straight To Distressed Sale: Any vacant home or occupied home with an owner that doesn’t want to participate will be foreclosed upon and sold as a distressed resale property. Think REO/Bank Owned. Well… that was going to happen anyways. Why waste the time and resources buying a home you’re going to foreclose on? (Press Release 1/30/2013)
  • The Unqualified Refinance: Home owners in the program will already be seriously delinquent on their homes. Delinquency creates credit problems. Low credit will get your refinance denied. Not even HARP allows delinquent borrowers to refi. See eiligibility here. So…. the state is going to have to create a special refinance program (or subsidize a current one) that allows delinquent borrowers with low credit scores to refinance their loan. This sounds an awful lot like how they created the loans that got us into this mess. Who is going to buy these loans if they aren’t under QM rules? Fannie and Fredddie can’t.
  • Terrible Keynesian(ish) Economics: RGJ quote from Breslow, “It’s not a panacea,” he said. Still, “Doing nothing doesn’t help our situation.” Ahhh! Didn’t we learn from AB 284 that government intervention isn’t always needed? 284 went through in October of 2011 and the banks still haven’t gotten around it. That’s 1 year, 4 months, 1 week, and 1 day further away we are from getting out of this mess than if the bill wasn’t passed. Many states are having an actual recovery; not a mini bubble. Get out of the way and let the market correct itself. All you’re doing is delaying the inevitable.  Added Bonus: Check out Hayek vs Keynes videos… Part 1 Part 2
  • Just a funny quote: RGJ quote from Breslow, “Banks also are stymied by a “moral hazard clause,” which prevents them from helping one homeowner without helping another equally, Breslow said. A nonprofit would be able to bypass that hurdle.” Pretty funny that the state allowed text of them acknowledging they don’t have to be fair to all residents.

Okay I’m done ranting. What do you think? 

Questions or want to know more about buying or selling in Reno and Sparks? Contact Broker Ricky Beach at (775) 750-1437 or Ricky@Resnv.com

What’s Up With Fannie Mae List Prices?

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If you’ve been looking for houses the past 6-8 months you’ve noticed there isn’t much inventory and prices are going up. Well, Fannie Mae is onto this and has been trying to prop up the market even more.

Go ahead and search the Fannie Mae listings. Search Here

Now run a search on closed and even active comparables around it.

Anything look funny?

Yeah, Fannie Mae is adding anywhere from 20-30% of market value to their listings. While the market is going up there is only a slight chance most of these will appraise.

Not only are they doing this with REOs but there are reports of this happening with short sale approval prices. View here, here, and here.

The Why And The How

  • Fannie Mae holds the majority of serviced and delinquent homes (GSEs and HUD own or insure 90% of all loans). By holding most of the active and shadow inventory Fannie believes they can control the market. To an extent this is true.
  • A slow leak of homes while jacking up prices will take less of a hit on their books.
  • Nearly all of Fannie Mae properties may be purchased with the HomePath Mortgage. HomePath mortages don’t require an appraisal. The down is less than FHA and there isn’t any mortgage insurance. So a buyer sees an overpriced house that won’t appraise but knows they can get it by using a HomePath mortgage.

Buyers not using HomePath aren’t going to be too happy with these price increases but can you really blame Fannie Mae? They’re leveraging market conditions and inventory to their advantage. Would we berate a normal seller doing this or is it different because tax payer money is involved?

What do you think?

If you have questions about buying or selling a home in Reno or Sparks contact Broker Ricky Beach at (775) 750-1437 or Ricky@Resnv.com

 

Ricky Beach

Broker|Owner|Realtor®|CDPE®|SFR®

 

Renown Real Estate Services

6900 South McCarran Blvd., Suite 3040

Reno, NV 89509

 

| Cell: (775) 750-1437 | Fax: (775) 562-4779 |

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